If you’ve ordered products or materials for your business or home recently, chances are you had to wait longer than usual to receive them. Maybe you’re still waiting now. What’s going on?
The core issue is an abundance of orders that’s created a massive backlog of full shipping containers at packed ports. And the backlog itself simply makes all the usual work of unloading and distributing at ports take longer due to the sheer volume. And it’s overtaxing the limits of the well-established logistics system.
What’s Keeping the Backlog in Place?
If that seems simplistic, consider the perfect storm of factors keeping the containers full (and therefore immobile), including:
- Orders dropped then rebounded. While there was an initial drop in orders for goods and raw materials at the start of pandemic, that didn’t last. Online ordering picked up dramatically for items consumers use while stuck at home like home office supplies and furnishings and electronics. More orders means more full containers to unload, empty, and send for refilling.
- Manufacturing orders add to the volume. Now that most manufacturers are back on line (many never went off line for long or at all actually), their increasing orders are adding to the shipping volume. Many are also stocking up on supplies just in case (as opposed to just in time) and ordering more than usual.
- Tariffs compound the issue. Imported steel tariffs have lead to more domestic sourcing, which then diverts containers from overseas shipping.
- Periodic port closures due to Covid surges and worker shortages. This means fewer workers are available to do the unloading and emptying. For example, “truckload carrier Schneider National Inc. said the ‘average unload dwell time’ for its customers using containers was up 70 percent in the second quarter over the same period in 2019 because of a shortage of workers to handle the boxes,” reports the Wall Street Journal.
- Delays in rail transport. Some rail lines have been temporarily haulted until they can be loaded to full capacity, slowing arrival and departure of containers.
- A relatively set number of shipping containers. “Container rates and availability are usually built into annual contracts between shippers and the carriers, and these deals normally have strict requirements, such as only nonstop service between ports or a minimum of two sailings a week.” Now due to backlog of containers, many are taking what they can get even if the terms are less favorable – and definitely more expensive (instead of about $2,000.00 for a standard 40-foot container contract to 10 or more time as much if you are willing and able to pay a premium for guaranteed on-time delivery – not sustainable over the long term, so many are forced to settle for delays.
- A limited number of long-haul truck drivers for inland freight. This means that it takes longer to deliver containers to their destinations and get them back to ports for refilling.
Bloomberg Businessweek reports “the system underpinning globalization—production on one side of the planet, connected to consumers on the other by trucks, ships, planes, cranes, and forklifts—is too rigid to absorb today’s rolling tremors from Covid-19, or to recover quickly from the jolts to consumer demand or the labor force.”
At this point in time, the solution, unsatisfying as it may sound, is that we must wait. It just takes time to empty and deliver the goods so containers can be refilled and recirculated again. Anyone who has ever cleaned out a storage room or moved house can probably relate – it just takes time to deal with every box and container.
Are More Containers the Solution?
There are only a few container building companies in the world, most in China. But even with more containers, there still must be an efficient way to get them in and out of ports and manufacturer locations. “In principle there are more than enough containers to handle global trading volumes. In practice … availability in several parts of the world has become incredibly tight because large volumes of containers are stuck in the wrong place,” reports the Wall Street Journal.
The good news is that production of new containers is up. The bad news, according to this article from Freight Waves, however, is that “this year’s rise in production comes after a period when orders were below market replacement requirements. According to [shipping container leasing company] Triton CEO Brian Sondey, ‘A lot of the container production that’s happened this year, to some extent, is making up for low production volumes in 2019 and the first part of 2020.’” The net result is producers must first catch up before a surplus can be created.
Many of the logistics issues outlined above are not new, but the pandemic has compounded them and created the ultimate stress test for the industry. Meanwhile, removed from the ports and anxiously checking their receiving docks and mailboxes, manufacturers and consumers alike can merely wait.
At CEP Technologies, we’re committed to understanding this evolving situation and communicating with our customers and suppliers. Please contact us with questions or to learn more about our core capabilities!